Title
Amendment to Public Transit Furniture Advertising Revenue Contract 143744 Due to COVID-19
Description
Request to authorize the City Manager, or his designee, to amend Contract 143744 with Lamar Advertising (Lamar) for advertising on Phoenix's transit furniture by charging percent revenue share (68.25 percent) only in lieu of the Minimum Annual Guarantee (MAG) from April 1, 2020, through Sept. 30, 2020.
Report
Summary
Due to the COVID-19 national pandemic, many local and national businesses have significantly reduced advertising, resulting in an estimated 46 percent decrease of Phoenix bus furniture advertising revenue in April 2020, as compared to the same month for the previous year.
Lamar reports that due to the impacts of COVID-19, active advertising contracts are being cancelled as events are called off and businesses are closed; advertising campaign renewals are stagnant, with increasing attrition rates; and new business development is virtually nonexistent. As a result, Lamar has experienced delinquencies and non-payments of invoices for services rendered, and made arrangements for suspension of billing with some advertisers while their businesses are closed or operating under government restrictions. Many of these advertisers are small, locally-owned businesses.
The Public Transit Department is requesting to provide relief under this contract through Sept. 30, 2020 due to many businesses remaining closed, or reopening at significantly lower activity levels, and the continued economic downturn. This relief for Lamar and its advertisers will mitigate the effects of decreases in advertising revenue related to COVID-19.
Under the amended contract, Lamar will be required to adhere to specific requirements as follows:
- Passing financial relief on to clients/advertisers, where applicable;
- Submitting weekly sales reports;
- Giving notice of any Coronavirus Aid Relief and Economic Security (CARES) Act funds received;
- Recalling and/or re-employing furloughed or laid off employees, where applicable;
- Providing two months of medical benefits for furloughed or laid off employees;
- Working with Community Economic Development on other relief and employment opportunities, where necessary; and
- Complying with all other terms and provisions of the contract, which will remain in effect.
Public Transit staff will continue to evaluate quarterly sales revenue and other relevant sales data. Council approval will be required to authorize any subsequent proposed extensions.
Contract Term
This amendment will allow percent revenue share (68.25 percent) only in lieu of the MAG for a period beginning (retroactive to) April 1, 2020 through Sept. 30, 2020. The contract's term will remain unchanged, ending on Dec. 31, 2021.
Financial Impact
Public Transit staff estimates that the proposed amendment to the Lamar public transit advertising contract will result in approximately $100,000 in reduced revenue for Public Transit for the time period of April 1, 2020, through Sept. 30, 2020. The Federal Transit Administration funds provided to the City of Phoenix through the federal CARES grant are expected to offset the reduced advertising revenue.
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Public Transit Department.